Visa in Israel- The Future of Fintech

U.S. credit card super-company, Visa, has elected to tap into the fintech industries of select countries, and Israel is a primary focal point. The payments giant launched a technology scouting hub in Tel Aviv this month, announcing at the beginning of February that it aimed to add Tel Aviv to a list of cities that make up its collaborative lab operation.

The actual collaboration lab onsite in Israel is an office space where major companies are invited to bring their various innovations and discern how best to integrate technologies with Visa’s payment system, which could potentially have a massive impact on not only U.S. credit in the future but also the credit systems of other countries.

The integration of innovative tech from startups that come together under the new program is meant to help the fintech industries of several countries flourish while also ensuring that Visa leads the credit card space in the future. These countries, of course, include the U.S. but also India, the U.K., Israel, Singapore, and Germany. The program so far has launched in New York, San Francisco, Berlin, London, Dubai and Singapore. This will also expose lots of startups to retailers that use Visa payments all over the world, so everyone involved has massive prospects at stake.

Back in 2015, this program already launched in Israel once under the title, Collab, and that program closed prematurely, which is why the faith of many is restored now that it has returned just under three years later. When Visa threw its hat into the Israeli fintech ring the first time, it was billed as an R&D center. The Times of Israel reported at the time that David Page, co-creator of Visa Europe Collab, said, “Israel is known as the ‘start-up nation’ and its entrepreneurs are turning their creativity to the fintech arena.” The motivation was clearly spurred by the fact that Israel’s innovation has proven nonpareil over the years.

Visa originally partnered with MasterCard in that project, the latter having already been operating in Israel for more than four years. Visa, however, was biding its time for Collab as evidenced by the fact that even Visa Europe Collab was new at the time. The credit card giant had always seen Israel as being integral to the global scheme, though its first launch was in May of 2015 and based in London. That same month, though, it was already announcing the launch in Tel Aviv—the very next hub. In other words, it was intended to spearhead the project along with the hub in London ahead of subsequent launches in the U.S., Germany, India and Singapore.

Page’s Visa Europe Collab co-creator, Steve Perry, told The Times of Israel then, “Visa is in a unique position to help innovators develop and scale their ideas. We have 50 years of industry expertise as well as the connections and scale offered by more than 3,000 European member banks and financial organizations. Now, through our innovation hub, we are creating a network of partners and a community that will help us provide the mentoring, advice and experience start-ups and entrepreneurs need to get their ideas off the drawing board and into the commercial world.”

He added that Israel was essentially being viewed as an epicenter of fintech innovation, and he pointed to startups like MyCheck, Payitsimple, Zooz and Prontoly to exemplify as much. They were among the first to take advantage of Visa Europe Collab the first go-round. This time, the Tel Aviv studio is back and focusing on, in addition to retail, open banking services, authentication and transportation. The earliest startups to get involved thus far on the second wave are HopOn Ltd., AU10TIX Ltd., Idomoo Ltd., and Personetics Technologies Ltd. The first is a developer of apps for mobile ticketing, the second an Internet ID verification startup, the third a customer relationship management solutions provider, and the fourth an A.I.-centric, personalized guidance company.

American startup, Personetics, already has its own office in Tel Aviv in addition to offices in London and New York, and they collaborated with Banca Transilvania—the second biggest bank in Romania—on a two-day business brainstorming session at Visa’s reestablished hub. Banca Transilvania brings 2.2 million customers to the table with its 7,000 employees, and Visa is already using the Tel Aviv center to incorporate them into its payments ecosystem, finding ways to utilize Personetics’s A.I. innovations to enhance new cognitive banking solutions with the aim of engineering personalized customer service for financial institutions, drawing on machine-learning concepts.

Published in the new American book, The Economics of Crowdfunding, which acts as a sort of academic journal whose editors serve as peer reviewers, Mark Fenwick of Kyusha University’s graduate law school, based in Fukuoka, Japan; Joseph McCahery of Tilburg University’s Economics Center, based in Tilburg, The Netherlands; and Erik Vermeulen, also of Tilburg University’s Economics Center, collaborated in penning the book entry, “The Economics of Crowdfunding: Startups, Portals and Investor Behavior.” In it, they refer to the whole of Israel as “A market known for its venture capital industry, a strong R&D focus, and large multinationals that are open to fintech. These ingredients play a crucial role in making Israel an attractive site for investing.

“But the evidence does suggest that collaborative regulation that facilitates experimentation is key,” Fenwick et al. add. “For now, policy experimentation seems to be the way to go for regulators. It is, therefore, crucial that we track the effectiveness of regulatory sandboxes in 2017. After all, they are relatively new, and we need to build a better understanding of their effectiveness to improve their design.” In other words, economists from around the world see Israel as one giant lab in which all sorts of experimentation are and should be conducted to further the development of the global fintech sector. Collaboration, they claim, is key not only on from the policy end but also from the private end because regulations in Israel currently create the optimal political climate in which to test innovative ideas that are likely to fit the laws and regulations of many other developed countries from Japan to The Netherlands or the U.K.

Visa is ahead of the pack in this rationale, and the data accrued from innovative experiments orchestrated by their new fintech hub in Tel Aviv will contribute to the data being amassed industry-wide. All of which is expected to inform how other countries eventually conform to new models of policy-payment-personalization climates in which whole private credit systems may one day be based in the future.